Expiration Of Developer Rights – What Happens To The Land Where Units Were Not Constructed

Daniel J. Miske | Husch Blackwell

Facts

Developer subjected property to the condominium act in Massachusetts in 2008. By the terms of the deed, it included all the “land and improvements at the property…” There were to be six wings and up to 109 units built over a period of seven years. When the deed was recorded, 33 units had already been constructed. The additional wings were shown on the plans and noted on the master deed as “presently constitute common areas and … may be completed as additional phases.” The declaration contained a reservation of developer rights that provided the developer seven years to “substantially complete the additional phases” and that a failure to complete them would constitute a waiver of development rights. The day before the developer rights were to expire, the developer recorded a series of documents to expand its ownership rights and extend the development rights an additional seven years. Sixteen days after the documents were recorded the association filed suit. The association sought declaratory relief that the developer’s rights had expired and that the developers attempts to extend those rights was invalid. The developer answered and counter-claimed that it was in the right.

Trial Court

On cross motions for summary judgment, since the facts were not in dispute, the court held that “the developer’s phasing rights had expired … and that its attempt to extend those rights for an additional seven years … was invalid.” The developer appealed.

Appellate Court Decision

The appeals court affirmed the trial court holding that the unit owners had the right to rely on the phasing provisions that existed when they purchased their units. The developer could not amend as it sought because it had not substantially completed the units as required.

LESSONS LEARNED

1. Read your documents (this applies to all association documents – e.g. vendor contracts) and make sure you calendar at least six months out any deadlines, so that you have adequate time to prepare. In this case you probably would have needed one to two years out, but six months is generally enough; and
2. Trying to do things at the last minute can often lead to very expensive results. Here not only was the amendment invalid, but I am sure the attorney fees were significant.

Kettle Brook Lofts, LLC v. Specht, ___ N.E.3d ___ (2021)

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